THE SEMI-government telecom giant, CyTA, has entered uncharted territory with its refusal to comply with an interim order to raise prices for mobile telephony, risking a potential £5,000 daily fine.
The country’s competition watchdog says the move is unprecedented, warning that CyTA’s decision-makers must be held to account for questioning the authority of a state institution.
CyTA’s Board of Directors yesterday announced the decision to ignore an order by the Commission for the Protection of Competition (CPC) to freeze existing low rates for mobile telephony (currently 3.9 cents for mobile to mobile calls) and return to pre-April rates of six cents a minute for mobile to mobile and five cents a minute for mobile to land line. The decision was taken in the public interest, says the CyTA announcement.
The CPC issued the interim order after CyTA’s lone and struggling competitor Areeba complained that Cytamobile-Vodafone was abusing its dominant position in the marketplace.
Areeba protested that CyTA was squeezing prices by lowering mobile call rates to match those of Areeba, minimising its chances of taking a slice of CyTA’s 96 per cent share of the market. The CPC found in a preliminary decision that CyTA was abusing its position by deterring healthy competition in the marketplace and ordered the telecom giant to return mobile rates to pre-April levels until the case could be heard in court.
CyTA yesterday refused to comply, saying it would appeal to the Supreme Court to annul the interim order while maintaining present low rates.
CPC Chairman Christodoulos Tselepos said the move was unheard of and a serious violation of competition law. He called on CyTA’s superiors, the present government responsible for appointing the board, to hold the directors to account.
“When we live in a state of law, we must respect the institutions and their decisions. When we start selectively choosing to implement whatever suits us, then we have problems with the institutions, especially from organisations controlled by the state,” said Tselepos.
“A legal order remains so until a court decides otherwise. You can’t choose to execute what suits you. Where will this lead?
“It is the first time this has happened, it’s unheard of. Have you ever heard of a state organisation saying we don’t respect the decision of a state institution?” he asked.
Tselepos called on the government to take up its responsibility. “This is not a CPC problem, it is a general problem. The political superiors have to decide if the board can choose to do what it wants at will. If the state is not obliged to respect its own institutions then we are burnt.”
The chairman refused to be drawn into the prospect of imposing hefty fines on CyTA, saying: “The Commission will work within the confines of the law, we will convene and decide what to do. But there are also legal provisions, the Attorney-general and the state that can act.”
“A basic principle of the rule of law is respect for the institutions, otherwise, why should anyone obey any decision. If this goes unnoticed, it will be a greater problem.
“We will wait and see how the state will deal with the board of directors and if they have political cover. The Commission’s job is not to clash with anyone. We are an independent institution trying to impose the law of competition.”
CyTA argues the CPC has no authority to fix prices since the Telecommunications Regulator already ruled that CyTA’s mobile rates were above cost prices. It further argues that not only are its rates above cost price, they are also above its competitor’s by 2.4 to 20 per cent.
“The CPC is asking us to raise prices (above our competitors) by 26 to 67 per cent, and from this overpricing make an additional profit of one million pounds a month,” says CyTA.
The semi-government organisation adds it has an obligation to consumers, “who are also its owners, to manage with ethos, responsibility and vision the national wealth that is its networks, offering to consumers high quality services and competitive prices”.
A telecom analyst noted that the Telecommunications Regulator deregulated the mobile telephony market last March, once it judged that retail prices were above cost prices.
“From that point, competition law contains other elements to judge whether there is abuse of a dominant position. The CPC can judge this. Abuse does not only mean prices, you also look at penetration of the market and advertising and price squeezing,” said the analyst.
“The CPC looked at the complaint by Areeba, decided it looked like abuse and issued an interim order until the case could be examined in full. Their thinking was probably that the ‘weaker party’ Areeba was likely to incur more damage than CyTA in the interim period if prices stayed the same.
“The CPC is within its jurisdiction to deal with this issue. I think CyTA is acting too scared of the competition,” noted the analyst.
